consumer debt counseling

Consumer Debt Counseling

Deciding to Seek Debt Counseling

More and more people are turning to debt counselors to help them get out from under a mountain of debt. Some consumers are finding out the hard way, however, that not all debt counselors are created equal. One so called "non-profit" counseling agency pockets your first month's check, which you assume is being applied to your debts, and calls it a "charitable contribution." Agencies like these may make you wary of seeking help from a consumer debt counseling agency, but if you know how to choose a reputable agency and you exercise a bit of caution, you can benefit from their services.

What Can I Expect From a Debt Counseling Agency?

Just what can you expect from a debt counseling agency? Besides providing general budgeting and money management advice to help you prevent future debt problems, they can negotiate with your creditors to get them to eliminate late fees, extend the term of your loan, or lower your interest rate. If your debt is burdensome enough, the debt counselor will encourage you to enter into a debt repayment plan requiring you to pay a set amount to the agency each month, which they then pay to your creditors.

How Do I Choose a Debt Counseling Agency?

For starters, find out which debt counseling agencies near you are members of the National Foundation for Debt Counseling (NFCC) or the Association of Independent Consumer Debt Counseling Agencies (AICCCA), the largest and most respected networks of debt counseling agencies. Members of these associations are put through a rigorous accreditation process performed by independent third-party organizations, which carefully review the operating practices of the debt counseling agencies and the effectiveness of their counseling. The widely-known Consumer Debt Counseling Service (CCCS) is a member of the NFCC. You can find a list of agencies near you in your local phone book yellow pages or online at NFCC's Web site or AICCCA's Web site (see link box on upper right for links to Web sites).

Once you've narrowed your search down to one or two agencies, it's a good idea to check them out with one or more of the following to see if complaints have been filed against them: your state Attorney General's office, local consumer protection agency, and Better Business Bureau. You can find contact info for your State Attorney General at the National Association of Attorneys General Web site.

Now you're ready to call the consumer debt counseling agencies and ask them a few questions such as: What services do you provide? Do you provide free educational materials? If so, how can I obtain them? Are there fees for your services? What are they? Do I have to pay anything up front? Are there monthly fees? How are they calculated? What training do your counselors have? Are they certified or accredited? Who oversees or regulates your agency? Is your agency audited annually?

For a list of questions you should ask about debt repayment plans, see Fiscal Fitness: Choosing a Debt Counselor on the Federal Trade Commission's Web site.